What Is a Preferred Vendor Agreement?

A preferred vendor agreement is a contract drawn up between a vendor and an organization that clearly lays out the terms of their business relationship.3 min read

A preferred vendor agreement is a contract drawn up between a vendor and an organization that clearly lays out the terms of their business relationship.

About Preferred Vendor Agreements

Large organizations may choose to enter into preferred vendor contracts with venues, hotels, and other vendors for the following reasons:

Clear expectations

Improved efficiency

Ease of event planning

Cost savings

These agreements often have an attrition clause that ensures the organization fulfills contractual obligations, such as providing food and beverages and pick-up rates. This reduces the vendor's risk and exposure.

In exchange for providing these assurances, organizations usually receive special treatment, including lower rates. Large companies prefer to draft these agreements themselves instead of using the vendor or hotel contract. If you're a vendor without a current preferred vendor agreement in place, don't expect the organizations you're targeting to use your standard in-house agreement.

What If You're Not on the List?

If you're not currently on the list of preferred vendors for an organization, you might wonder how you can get on it. You'll have to answer the following questions:

Which channels should I use to reach the right people?

Who should I contact?

A good starting point is beginning with someone you know in the organization. Be careful not to jump right in, however. You should first understand what the organization needs.

If you know an organization already has an existing preferred vendor contract with another party, be prepared to impress your potential client if you want to win a contract with him.

When conducting a meeting with a potential client, you should at least know the following about their business:

Basically, expect to do a lot of research about the business. It can be time-consuming and tedious to do all this homework, but it's essential if you want to win the contract.

Transparency and Preferred Vendor Contracts

Conference organizers often use preferred vendor agreements, and there are some pros and cons. For example, venues and vendors often hide details about their business arrangements. There's often no transparency with customers.

If the business is intent on keeping their business arrangements secret, it's possible that they engage in some unsavory practices. If this is the case, the end user — typically the meeting planner — is the one who suffers.

The downside to a vendor agreement is that if the customer is forced to select from a very small number of vendors, he might receive subpar service and pay more for it. Vendors and the venue that have a lock on the market and, without competition, might not feel compelled to provide the best service possible.

One of the worst aspects of preferred vendor agreements is the way they're often sold to event professionals. For example, venues will often make their vendors seem perfect and outstanding with descriptions they place online or in brochures. They may describe them as “superior,” “hand-selected,” or “excellent.” Unfortunately, when event, meeting professionals, and customers simply accept these claims without knowing if they're actually true, it can lead to a disappointing experience.

However, these professionals might tolerate these arrangements for the following reasons:

The client insists on the venue.

The venue is ideal.

The venue is in a convenient location.

As a consumer, you may try to use your own vendor, but it might be impossible or too expensive to do so. In this situation, you might face a lot of tough choices and none of them seem good. The best thing you can do is speak up for yourself and demand to see exactly how the organization selects its preferred vendors. Demand to look over the contracts and pay attention to the fine print.

In an ideal scenario, the venue would be transparent. The venue's representative would explain that you have to use their preferred vendor because the vendor has paid for the privilege. However, you shouldn't expect this level of transparency.

Having your business on a preferred vendor list comes with some perks. Expect to do your homework to find out what you need to do in order to land such a contract.

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